Consumer Slowdown

The U.S. consumer, who has gone right on buying heavily despite the recession, finally showed some signs of slowing up. The Federal Reserve Board reported last week that March department-store sales failed to live up to expectations. While sales were 1% above a year ago, the board had expected a rise of 6% because of the early Easter. New York stores were up 7%, Minneapolis 6%, Atlanta 4%, but Cleveland, Chicago, St. Louis and Dallas were all down, as much as 3%. Hoping to stir renewed interest. Sears, Roebuck & Co. announced an average 13% price cut in its spring catalogue, said it was adjusting all prices in its retail stores.

Another indication that consumers were growing cautious came from an FRB report that installment buying dipped $435 million in February. Much of the decline was due to badly slumping February auto sales, when poor weather kept buyers out of the showrooms. With the push of hard selling (see Autos), sales were on the rise in March. But new-car inventories of 887,000 were so high that carmakers were not planning to step up production. Ward's Reports counted March production at 357,000 cars, predicted the same rate through the April-June quarter.

In the overall industrial picture, inventories continued their power-diving decline, dropped another $700 million in February, showing that U.S. production had been cut much more than sales. The low state of inventories promised an upward turn in some industries. No one predicted precisely when the buying would start, but there were a few hints.

The much-troubled machine-tool industry reported that new orders in February increased 18% over January and 22.5% over December, which was the poorest month since October 1949. The National Association of Purchasing Agents announced that only 30% of its members reported worsening business conditions v. 45% the month before, while 19% found more business coming in v. 16% in February. Said the association: "There are some hopeful signs that the sharp downtrends in production prevalent for many months may be ending. Furthermore, there are indications that even the rapid rise in unemployment may be near the end. While only 7% say that they have more people on their payroll, 50% indicate they are at least holding their own."

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